Chessman Corporation factors $600,000 of accounts receivable with Liquidity Financing, Inc. on a with recourse basis. Liquidity Financing will collect the receivables. The receivable records are transferred to Liquidity Financing on August 15, 2014. Liquidity Financing assesses a finance charge of 2.5% of the amount of accounts receivable and also reserves an amount equal to 5.25% of accounts receivable to cover probable adjustments. Chessman prepares financial statements under ASPE.
(a) According to ASPE, what conditions must be met for a transfer of receivables to be accounted for as a sale?
(b) Assume the conditions from part (a) are met. Prepare the journal entry on August 15, 2014, for Chessman to record the sale of receivables, assuming the recourse obligation has a fair value of $6,000.
(c) 'What effect will the factoring of receivables have on calculating the accounts receivable turnover for Chessman? Comment briefly.
(d) Assume that Chessman is a private enterprise and prepares financial statements under IFRS. 'What conditions must be met for the transfer of receivables to be accounted for as a sale?

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